In recent years, Internet-based systems and other computer systems that facilitate purchasing (buying or leasing) automobiles have become increasingly important tools for both consumers and dealers. For example, vehicle search services provided through the Internet have revolutionized the process of searching for a vehicle and dealer management systems (DMS) have transformed the management of finance, sales, parts, inventory and administration of other aspects of running a dealership. Despite the prevalence of these tools, the purchase process remains highly fractured.
The purchase process through a dealership typically involves several distinct steps including: i) vehicle search and selection, ii) a test drive, iii) price negotiation, iv) third party loan approval, v) selection of financing and insurance (F&I) options, vi) document generation and execution. In a typical scenario, a consumer looking to purchase a vehicle wanders dealer lots or uses disparate web sites provided by dealers and third parties to locate vehicles of interest. If the consumer chooses to finance the vehicle, the consumer may also go to a bank or use the bank's web site to apply for a loan. In addition or in the alternative, the consumer may choose to finance the vehicle through a loan process facilitated by the dealer's sales desk or F&I department, in which case the dealer will interact with one or more loan providers to submit loan applications for the consumer.
When the consumer finds a vehicle of interest, the consumer may schedule a test drive with the dealership and, if the consumer chooses to purchase the vehicle, negotiate a price with the dealer. In some cases, technology may facilitate the negotiation. For example, several third-party vehicle search sites are available that allow consumers to research market prices. This can give the consumer confidence walking into the dealership, but serves largely as a negotiation tool. The negotiated price still relies on back and forth negotiation until, optimally, both the consumer and dealer reach the subjective belief that they came to a fair deal.
After negotiating a price with the salesperson, the consumer then goes to the F&I office to workout payment through cash, a loan arranged by the consumer or a loan arranged through the sales desk or F&I office. Prior to finalizing the deal, the F&I office typically tries to sell the consumer additional options such as warranties, paint protection packages, VIN etching or other “insurance” products. This may be the most confusing part for the consumer as the consumer must quickly balance the risk of damage, theft or malfunction with the price of the product being offered.
After the consumer selects the F&I products, the F&I employee enters the final data in the dealer management system. This may require entering information received from the salesperson, consumer, or financial institution and, some cases, reentering information already entered in other systems. Based on these inputs, the dealer management system generates and prints the relevant documents for signature. Often, this is the first time the consumer sees the final contract terms and price, which often includes additional fees, such as document fees or other dealer added fees. Thus, conventional systems are dealer-centric because documents are generated and controlled by a DMS controlled by the dealer and to which the customer has no access.
Despite the high information disadvantage faced by consumers, consumers often give the documents presented by a dealer little more than a cursory review because it is difficult for consumers to back out of the deal at this point due to the high transaction costs. For example, if a consumer decides to cancel a deal after all the documents are finalized, the consumer must go back and repeat the vehicle selection, negotiation, selection of F&I options and, in some cases, the third party loan approval process. These costs are exacerbated if the consumer elects to go to another dealership.
The high transaction costs result in part from the fragmented and incomplete technologies used in the vehicle purchase process. Typically, the consumer must use one system to search for inventory and then another system to request a loan. There is often limited or no coordination between these systems and the consumer may have to setup separate accounts with the systems, provide duplicative information and interact with the systems through different web sites or mobile apps. Furthermore, the dealer may track or otherwise manage sales, finance, parts, service, inventory and back office administration using a dealer management system that has little or no interaction with the inventory search systems or the loan provider systems. Consequently, the consumer must provide duplicative information to the dealer for the dealer to enter into the DMS. Moreover, the consumer or dealer may have to coordinate with a loan provider so that the dealer can enter loan information. Thus, there are significant breaks in data flow that can lead to errors and substantial data duplication.
Furthermore, the document flow was traditionally managed by the DMS and is thus dealer-centric. More particularly, documents that the user had to review and execute as part of the purchase were generated by the DMS at the dealership. The control of documents by the dealer's system makes it difficult, if not impossible, for a consumer to review documents prior agreeing to final terms.